IRDAI took this step
The regulator has also felt that there is a need to encourage customers who pay premium in advance. Underlining this difference, the Insurance Regulatory and Development Authority of India (IRDAI) recently issued a draft guideline allowing life insurance companies to offer discounts on renewal premiums collected in advance. This serves two purposes. One, the policy does not lapse and second, the customer gets a discount on the payment of premium.
In taking this initiative, IndiaFirst Life has joined the few companies in the industry which have given the benefit of discount to the customers on payment of advance renewal premium.
The purpose of this facility is to promote timely policy payment by giving these benefits to the customers.
Guaranteed Continuity of Cover: Paying in advance means no tension of missed payments. Customers are unable to make payment due to non-availability of funds on due date. This causes the policy to lapse prematurely. Now the customers can pay the premium at any time during the year as per their convenience and can be sure that they are covered against the risk.
Timely/advance premium payment: Customers paying premium in advance can get benefited. They can avail the discount by paying the premium in advance. Using this feature, customers get an opportunity to pay premium in advance as per their convenience and get benefits from it.
Securing your loved ones in the future: Life insurance is a long term goal. In such a situation, it is important to keep the policy for the entire term for maximum benefits. Payment of premium in advance ensures that the policy remains active. The benefit of paying premium in advance can be used for further financial planning.
Tax Benefits: Policyholders can use this feature to avail tax benefits. When customers are unable to make the payment in the same financial year, they are no longer eligible for tax rebate. However, this feature gives customers an opportunity to arrange funds and invest without getting the benefit of interest.
These benefits can also have a kind of effect on the insurance industry. First of all, advance payment of premium does not cause the policy cover to lapse prematurely. This helps in reducing the cost of collection, which is incurred by the insurance companies for follow up. In such a situation, such benefits can be given back to the customers in the form of bonus etc.
Consistently having very high persistence increases profitability, reduces costs, optimizes long-term income. This leads to overall growth and development of the organization. On the other hand, paying in advance gives an incentive to the customers. This ends their tension and also ensures security. By offering these benefits to our customers, we have taken a step forward in ensuring customer delight and ensuring the efficiency of the organization.